Mark Scheme (Results)

Summer 2017

Pearson Edexcel GCE Business (8BS0)

Paper 2: Managing Business Activities
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Summer 2017
Publications Code 8BS0_02_1706_MS
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General Marking Guidance

 All candidates must receive the same treatment. Examiners must mark the
first candidate in exactly the same way as they mark the last.

 Mark schemes should be applied positively. Candidates must be rewarded for

what they have shown they can do rather than penalised for omissions.

 Examiners should mark according to the mark scheme not according to their
perception of where the grade boundaries may lie.

 There is no ceiling on achievement. All marks on the mark scheme should be

used appropriately.

 All the marks on the mark scheme are designed to be awarded. Examiners
should always award full marks if deserved, i.e. if the answer matches the
mark scheme. Examiners should also be prepared to award zero marks if the
candidate’s response is not worthy of credit according to the mark scheme.

 Where some judgement is required, mark schemes will provide the principles
by which marks will be awarded and exemplification may be limited.

 When examiners are in doubt regarding the application of the mark scheme
to a candidate’s response, the team leader must be consulted.

 Crossed out work should be marked UNLESS the candidate has replaced it
with an alternative response.
Question
Answer Mark
Number
1(a) Knowledge 2

Knowledge/understanding: up to 2 marks for, e.g.

 Price multiplied by quantity sold.

NB: If candidates state ‘income from sales’ award 2 marks. (2)

Question
Answer Mark
Number
1(b) Knowledge 2

Knowledge/understanding: up to 2 marks for, e.g.

 Fixed costs plus variable costs. (2)

Question
Answer Mark
Number
1(c) Knowledge 1, Application 3

Quantitative skills assessed:

QS2: calculate, use and understand percentages and percentage
changes.

Knowledge: 1 mark for identifying the capacity utilisation

formula.
 Current output/ maximum possible output x 100

Application: up to 3 marks
 Re-order formula to calculate current output
= maximum possible output x capacity utilisation
=34 200 x 0.92
=31 464 pasties

NB: if the answer given is ‘31 464’ award 4 marks. (4)

Question
Answer Mark
Number
1(d) Knowledge 1, Application 3

Quantitative skills assessed:

QS5: calculate cost, revenue, profit and break-even.

Knowledge: 1 mark for identifying either the profit variance

formula or the profit formula.
 Actual profit – budgeted profit
 Sales revenue – total costs

Application: up to 3 marks
 Calculate the variance in revenue for steak and stout pasties
= £14 370 – £12 250
= £2 120 favourable
 Calculate the variance in total costs for steak and stout
pasties
= £5 890 – £4 210
= £1 680 adverse/unfavourable
 Calculate the variance in profit for steak and stout pasties
= £2 120 – £1 680
= £440 favourable

NB: if the answer given is simply ‘£440’ or ‘+£440’ award 4

marks. (4)
Question
Indicative content Mark
Number
1(e) Knowledge 2, Application 2, Analysis 2, Evaluation 2
 Batch production involves the manufacture of a limited
number of identical products.
 This allows for greater productivity/efficiency compared to
job production which reduces the average costs of
manufacturing a pasty.
 Less capital will be required to set up a batch production
process compared to a flow production process therefore
they will have to raise less capital from crowd funding.
 Production of pasties is flexible so different
quantities/flavours etc. can be produced allowing them to
meet different sized orders from cafes.

Potential counterbalance:

 Could lead to Posh Pasties Ltd having to hold large stocks of

raw materials such as flour and meat for the different variety
of pasties.
 Less efficient than flow production so average costs will be
higher than they could be which will reduce the profit per
pasty.
 Could lead to worker demotivation compared to job
production because they are only involved in one part of the
pasty production process. (8)
Level Mark Descriptor
0 A completely inaccurate response.
Level 1 1–2 Isolated elements of knowledge and understanding – recall
based.
Weak or no relevant application to business examples.
Generic assertions may be presented.
Level 2 3–5 Accurate knowledge and understanding.
Applied accurately to the business and its context.
Chains of reasoning are presented, showing cause(s) and/or
effect(s) but may be assertions or incomplete.
An attempt at an assessment is presented that is unbalanced,
and unlikely to show the significance of competing arguments.
Level 3 6–8 Accurate and thorough knowledge and understanding,
supported throughout by relevant and effective use of the
business behaviour/context.
Logical chains of reasoning, showing cause(s) and/or effect(s).
Assessment is balanced, well contextualised, using
quantitative and/or qualitative information, and shows an
awareness of competing arguments/factors leading to a
supported judgement.
Question
Indicative content Mark
Number
1(f) Knowledge 2, Application 2, Analysis 3, Evaluation 3
 Crowd funding is where large numbers of individuals can
provide direct funding for a business or project which is
administered by a website such as www.crowdfunder.co.uk
 Posh Pasties Ltd can raise capital from potentially a very
large pool of investors making it more likely that they can
purchase baking equipment.
 The investors may require a lower level of reward than a
bank or venture capitalist allowing James and Holly to
maximise their returns.
 James and Holly can avoid using a bank as its main source
of finance, which may have viewed their start-up business as
too risky.

Possible counterbalance:

 The amount of money raised may not be large enough to

fund the project e.g. new baking ovens.
 Posh Pasties Ltd will need to satisfy the expectations of
potentially lots of crowd funders who may still want a return.
This could reduce the returns for James and Holly.
 Crowd funders may be wary to provide finance due to lack of
regulation in the crowd funding industry which could result in
Posh Pasties Ltd not being able to afford baking equipment/
delivery vans.

Possible judgement:

 Since Posh Pasties Ltd is a start-up business and as James is

a TV chef it is likely that crowd funding would generate
enough interest in the business due to his high profile. This
may then allow Posh Pasties Ltd to access more/cheaper
capital compared to a bank loan.
 Since Posh Pasties Ltd is a private limited company and
James has a high-profile crowd funding may not be
important because other sources of finance will be available
e.g. selling shares. (10)
Level Mark Descriptor
0 A completely inaccurate response.
Level 1 1–2 Isolated elements of knowledge and understanding – recall
based.
Weak or no relevant application to business examples.
Generic assertions may be presented.
Level 2 3–4 Elements of knowledge and understanding, which are applied
to the business example.
Chains of reasoning are presented, but may be assertions or
incomplete.
A generic or superficial assessment is presented.
Level 3 5–6 Accurate and thorough knowledge and understanding,
supported throughout by relevant and effective use of the
business behaviour/context.
Analytical perspectives are presented, with developed chains
of reasoning, showing cause(s) and/or effect(s).
An attempt at an assessment is presented, using quantitative
and/or qualitative information, though unlikely to show the
significance of competing arguments.
Level 4 7–10 Accurate and thorough knowledge and understanding,
supported throughout by relevant and effective use of the
business behaviour/context.
A coherent and logical chain of reasoning, showing cause(s)
and/or effect(s).
Assessment is balanced, wide ranging and well
contextualised, using quantitative and/or qualitative
information, and shows an awareness of competing
arguments/factors leading to a supported judgement.
Question
Answer Mark
Number
2(a) Knowledge 2
Knowledge/understanding: up to 2 marks for, e.g.
 Output per person/machine (1) per hour/time period (1).

NB: If candidates mix up production with productivity award zero

marks. (2)

Question
Answer Mark
Number
2(b) Knowledge 2
Knowledge/understanding: up to 2 marks for, e.g.
 A system where the product is checked/tested (1) at each
stage of the production process (1).

NB: If candidates mix up quality assurance with quality control

award zero marks.
(2)
Question
Answer Mark
Number
2(c) Knowledge 1, Application 3

Quantitative skills assessed:

QS1: calculate, use and understand ratios, averages and
fractions.
QS2: calculate, use and understand percentages and percentage
changes.

Knowledge: 1 mark for identifying the formula for gross profit

margin or gross profit.
 Gross profit/sales revenue x 100
 Gross profit = sales revenue – cost of sales
 Gross profit = operating profit + other operating expenses

Application: up to 3 marks
 Calculate gross profit = £2 523.2m - £757.7m
= £1 765.5m
or
Calculate gross profit = £440.3m + £1 325.2m
= £1765.5m
 Calculate gross profit margin = £1765.5m/£2 523.2m x 100
= 69.97%

NB: if the answer given has been rounded e.g. ‘70%’ ‘or 69.9%’
award 3 marks. (4)
Question
Answer Mark
Number
2(d) Knowledge 1, Application 2, Analysis 1
Knowledge: 1 mark for knowing what is meant by waste
minimisation, e.g.
 Producing goods and services at a given quality using as few
resources as possible/identification of an impact of waste
minimisation.

Application: up to 2 marks for contextualised examples, e.g.

 Could lead to greater levels of efficiency in the production of
trench coats.
 Could lead to less fabric/textiles needing to be ordered.
 Could lead to less faulty trench coats.

Analysis: 1 mark for explaining why the above would affect

Burberry plc, e.g.
 This could lead to falling average costs leading to higher
profit margins.
 This could provide a competitive advantage when the next
season’s clothing range is released. (4)
Question
Indicative content Mark
Number
2(e) Knowledge 2, Application 2, Analysis 2, Evaluation 2
 Stock can take the form of raw materials, work in progress
and finished products.
 Reduction in storage costs for fabric and trench coats which
will reduce total fixed costs.
 Reduction in opportunity costs since capital tied up in clothes
can be reduced.
 The clothing industry is dynamic so there is less chance of
being left with last season’s clothes which can quickly go out
of fashion.

Potential counterbalance:

 If Burberry plc releases a range of clothes which are popular

they may not be able to keep up with demand which may
damage its brand image.
 If there is a problem in the supply chain and deliveries of
fabric are delayed, Burberry plc will not be able to
manufacture trench coats.
 More orders of fabric will have to be placed which will reduce
the benefits of bulk buying.
(8)
Level Mark Descriptor
0 A completely inaccurate response.
Level 1 1–2 Isolated elements of knowledge and understanding – recall
based.
Weak or no relevant application to business examples.
Generic assertions may be presented.
Level 2 3–5 Accurate knowledge and understanding.
Applied accurately to the business and its context.
Chains of reasoning are presented, showing cause(s) and/or
effect(s) but may be assertions or incomplete.
An attempt at an assessment is presented that is unbalanced,
and unlikely to show the significance of competing arguments.
Level 3 6–8 Accurate and thorough knowledge and understanding,
supported throughout by relevant and effective use of the
business behaviour/context.
Logical chains of reasoning, showing cause(s) and/or effect(s).
Assessment is balanced, well contextualised, using
quantitative and/or qualitative information, and shows an
awareness of competing arguments/factors leading to a
supported judgement.
Question
Indicative content Mark
Number
2(f) Knowledge 2, Application 2, Analysis 3, Evaluation 3
 Inflation is the general increase in the level of prices in
an economy in a year.
 Inflation could increase the costs of buying-in fabric and
materials.
 Inflation could reduce the purchasing power of
consumers, resulting in falling trench coat sales.
 Inflation could increase uncertainty and make Burberry
plc reconsider its investment in its new factory in Leeds.

Potential counterbalance:

 The increase in inflation is so small that it will have limited

effects on the cost of fabric.
 Burberry plc could probably pass on any increase in costs
to its consumers by increasing its prices since they sell
luxury clothes.
 The increase in inflation is so small that it would not affect
the decision to open a new factory.

Potential judgement:

 Inflation is unlikely to affect Burberry plc since it targets

wealthy consumers with its clothes. Therefore, even if prices
are increased it is unlikely that sales will fall significantly.
 The rise in inflation is so small that the impact on Burberry
plc’s sales will be insignificant. (10)
Level Mark Descriptor
0 A completely inaccurate response.
Level 1 1–2 Isolated elements of knowledge and understanding – recall
based.
Weak or no relevant application to business examples.
Generic assertions may be presented.
Level 2 3–4 Elements of knowledge and understanding, which are applied
to the business example.
Chains of reasoning are presented, but may be assertions or
incomplete.
A generic or superficial assessment is presented.
Level 3 5–6 Accurate and thorough knowledge and understanding,
supported throughout by relevant and effective use of the
business behaviour/context.
Analytical perspectives are presented, with developed chains
of reasoning, showing cause(s) and/or effect(s).
An attempt at an assessment is presented, using quantitative
and/or qualitative information, though unlikely to show the
significance of competing arguments.
Level 4 7–10 Accurate and thorough knowledge and understanding,
supported throughout by relevant and effective use of the
business behaviour/context.
A coherent and logical chain of reasoning, showing cause(s)
and/or effect(s).
Assessment is balanced, wide ranging and well
contextualised, using quantitative and/or qualitative
information, and shows an awareness of competing
arguments/factors leading to a supported judgement.
Question
Indicative content Mark
Number
3. Knowledge 4, Application 4, Analysis 6, Evaluation 6
Lean Production Methods:
 By using fewer resources to produce the cars, McClaren Ltd
can maximise the profit on each car sold and generate more
profit per car. This profit can be retained into the company to
fund new engine design etc. which will allow it to gain a
competitive advantage.
 Lean production will result in fewer defective sports cars,
allowing the reliability and the performance of the cars to
exceed consumer expectations. This could enhance McClaren
Ltd’s brand image at the expense of its rivals.
 Market orientation can be expensive to carry out and it will be
difficult to find out enough information about sports car
consumers to satisfy every potential consumer’s needs and
wants.
Market Orientation:
 The business focuses on the needs and wants of the
customers to become more competitive.
 Market orientation will enhance the brand name of McClaren
Ltd since they are giving sports car consumers precisely what
they want. This means demand for the cars may become price
inelastic. Therefore McClaren Ltd can charge a premium for its
cars allowing them to maximise their profit margin.
 Market orientation will allow McClaren Ltd to meet customer
needs more effectively than other luxury car brands, such as
Ferrari. This will allow them to grow its market share at the
expense of their rivals, leading to higher revenues.
 Lean production may be difficult to achieve and using fewer
resources to produce the sports cars could have a negative
impact on quality. Wealthy consumers could end up switching
to a different brand of luxury sports car e.g. Porsche.
Potential recommendation:
 McClaren Ltd should focus on market orientation, since in the
luxury car market the consumer will demand the highest level
of quality and expect the car to meet their every need.
Therefore, if market orientation is not maintained, competitive
advantage could significantly decrease.
 McClaren Ltd should focus on lean production because
minimising the average cost of producing its cars will allow
the profit margin to be increased. Since the volume of sales of
£1m cars is low (niche market) it is critical to McClaren Ltd’s
(20)
 competitive advantage that the profit margin is maximised.

Level Mark Descriptor

0 A completely inaccurate response.
Level 1 1–4 Isolated elements of knowledge and understanding.
Weak or no relevant application of business examples.
An argument may be attempted, but will be generic and fail to
connect causes and/or consequences.
Level 2 5–8 Elements of knowledge and understanding, which are applied
to the business example.
Arguments and chains of reasoning are presented, but
connections between causes and/or consequences are
incomplete. Attempts to address the question.
A comparison or judgement may be attempted, but it will not
successfully show an awareness of the key features of
business behaviour or business situation.
Level 3 9–14 Accurate and thorough knowledge and understanding,
supported throughout by relevant and effective use of the
business behaviour/context.
Uses developed chains of reasoning, so that causes and/or
consequences are complete, showing an understanding of the
question.
Arguments are well developed.
Quantitative and/or qualitative information is introduced in an
attempt to support judgements, a partial awareness of the
validity and/or significance of competing arguments and may
lead to a conclusion.
Level 4 15–20 Accurate and thorough knowledge and understanding,
supported throughout by relevant and effective use of the
business behaviour/context.
Uses well-developed and logical, coherent chains of reasoning,
showing a range of cause(s) and/or effect(s). Arguments are
fully developed.
Quantitative and/or qualitative information is/are used well to
support judgements. A full awareness of the validity and
significance of competing arguments/factors, leading to
balanced comparisons, judgements and an effective conclusion
that proposes a solution and/or recommendations.
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